the top 10 things i wish the news would really say about money
I can't watch the news anymore. it's giving me gray hair. seriously... however, in regards to how to take a defensive economic position, here is my unsolicited $.02. although I'd like to take credit for this brilliance, none of these are really my idea...I just watch what financially stable people do (not what they say!).
1. put your eggs in many baskets...aka diversify...real estate is fine as long as you're not maxing yourself out for it. 401k is good too but should be balanced with cash. The point is, spread your eggs around. That way you don't get wiped out if one area tanks. And with a 401k or any other investment, keep an eye on it and have some understanding of how it works. More on that later.
2. when it comes to real estate, you lose the game when you run out of cash not when you lose equity... so you lost some equity this year, so what. as long as you still have cash to pay your mortgage, you're okay. if you want to walk away, that's up to you, but if you can still pay your bills, stressing over lost equity is all mental. just like feeling like a baller over gained equity was all mental.
3. On that note..as for your equity, you only realize the gains when you sell. If you're taking out loans against said equity, it's not a cash advance, it's a loan. Which isn't necessarily bad...but you must understand what it really is. Money that you don't have right now that must be paid back. However...if you spread your eggs around in the first place, you'd have cash on hand too so there would be no need for a HELOC.
4. Budgeting is cool, but it's probably not the small things that are breaking you. Even the lowest earning girls I know have money to get their hair and nails done and buy their lattes and what have you. How do they get by and still ignore the latte factor? cheap rent. low or no car notes. Ya, the little things add up, but not nearly as quickly as a $600 car payment will, plus the high insurance/maintenance to go with said luxury car...or let alone having a $2500 mortgage. So really, rather than worry about the latte factor...which honestly, if a latte is breaking your bank, you're already f'd in the game...worry about the big expenses (recurring and one time). Keep those in line with your earnings, and don't be afraid to say, I can't afford it right now. right now is not eternity.
5. As for income, don't spent based on your earning potential. Ya, you could make more money, but don't spend like you do until you **do** make more money. And if you have cyclical or seasonal income, don't spend based on the peak.
6. As for long term commitments...like a mortgage...you have to pay this thing for 30 years. This is a long time...so think about what could happen and assess the risk accordingly. If you're living paycheck to paycheck and carrying a mortgage, you are living with high risk. If you're not very good at your job, and YOU KNOW if you're not, you'll probably get fired one day, and that is high risk. If you have 6 months of mortgage payments stacked away, that is much lower risk. If you are married and your house note requires dual income, that is very high risk. If you are both rock stars at your job and don't plan on having kids, it is lower risk but still risky. If you are married and your house note only requires one income, but both people have income, sweet! That is very low risk and I envy you. Stack your chips and get ready to retire super early! So anyhow, just think your specific situation and how risky your long term commitments are...because i don't want to hear you whine later about 'how could this happen'. ish happens.
7. If a $300 increase in your mortgage will bankrupt you, you can't afford the house. no really. you can't.
8. As for understanding your investments and diversifying (from #1). How did these extremely wealthy people get totally wiped out of their entire life savings by Bernie Madoff??? It sucks, I do feel for them. But I also don't understand why they trusted him with everything. Someone with $10M to invest should know the basics of diversification. I mean, at least keep 20% around in cash. Just in case. It's not like losing the returns on that is going to drive you into poverty. And if you must bet big on one thing...really take the time to look in the investment portfolio and know exactly what is there. If you give someone $10M to invest, you should expect to have all of your questions answered to your satisfaction. 10 times a day if necessary. So, for people that had a net worth of $50M and lost only a few million with him, well...that sux, but it's okay because they spread their eggs around. But for the people that lost everything, it was just greed. theirs and his.
9. on that note. understand that human nature can be greedy and lazy. not to be too cynical, because it's a lot of good things too...but please, stop trusting people in regards to money. ask for details. review said details. if the numbers don't make sense, the problem is not you. it's the numbers. if you can't understand the numbers, the investment is very risky for you, because you don't know what it is. so don't put a lot into it and hope it works out. It really is that simple. If you're only investing a little, well, you can do less due diligence..but if something is "my whole retirement" you can't afford NOT to do due diligence. because it's all you have. so understand that if you are too lazy to check on your assets, someone else will be greedy enough to try to swindle you out of them. word.
10. and finally..speaking of lazy succubuses...be careful who you marry! your partner should either really be a partner to you and therefore entitled to the benefits of said partnership, or should be given only what is fair and nothing more. love and money are two different things. generosity is not a bad thing at all. but there is a big difference between being generous, and being taken to the cleaners for love. generosity with someone you love is awesome. foolishness is not.
that is all. i feel better now that i've gotten that off of my chest. suze orman comes close to giving advice like this. that's why i like her. Not because she'll give you strategies for getting rich, because she doesn't really, but because she gives you strategies for protecting what you have earned for yourself and not getting wiped out while still being a "good" person and caring about people.
1. put your eggs in many baskets...aka diversify...real estate is fine as long as you're not maxing yourself out for it. 401k is good too but should be balanced with cash. The point is, spread your eggs around. That way you don't get wiped out if one area tanks. And with a 401k or any other investment, keep an eye on it and have some understanding of how it works. More on that later.
2. when it comes to real estate, you lose the game when you run out of cash not when you lose equity... so you lost some equity this year, so what. as long as you still have cash to pay your mortgage, you're okay. if you want to walk away, that's up to you, but if you can still pay your bills, stressing over lost equity is all mental. just like feeling like a baller over gained equity was all mental.
3. On that note..as for your equity, you only realize the gains when you sell. If you're taking out loans against said equity, it's not a cash advance, it's a loan. Which isn't necessarily bad...but you must understand what it really is. Money that you don't have right now that must be paid back. However...if you spread your eggs around in the first place, you'd have cash on hand too so there would be no need for a HELOC.
4. Budgeting is cool, but it's probably not the small things that are breaking you. Even the lowest earning girls I know have money to get their hair and nails done and buy their lattes and what have you. How do they get by and still ignore the latte factor? cheap rent. low or no car notes. Ya, the little things add up, but not nearly as quickly as a $600 car payment will, plus the high insurance/maintenance to go with said luxury car...or let alone having a $2500 mortgage. So really, rather than worry about the latte factor...which honestly, if a latte is breaking your bank, you're already f'd in the game...worry about the big expenses (recurring and one time). Keep those in line with your earnings, and don't be afraid to say, I can't afford it right now. right now is not eternity.
5. As for income, don't spent based on your earning potential. Ya, you could make more money, but don't spend like you do until you **do** make more money. And if you have cyclical or seasonal income, don't spend based on the peak.
6. As for long term commitments...like a mortgage...you have to pay this thing for 30 years. This is a long time...so think about what could happen and assess the risk accordingly. If you're living paycheck to paycheck and carrying a mortgage, you are living with high risk. If you're not very good at your job, and YOU KNOW if you're not, you'll probably get fired one day, and that is high risk. If you have 6 months of mortgage payments stacked away, that is much lower risk. If you are married and your house note requires dual income, that is very high risk. If you are both rock stars at your job and don't plan on having kids, it is lower risk but still risky. If you are married and your house note only requires one income, but both people have income, sweet! That is very low risk and I envy you. Stack your chips and get ready to retire super early! So anyhow, just think your specific situation and how risky your long term commitments are...because i don't want to hear you whine later about 'how could this happen'. ish happens.
7. If a $300 increase in your mortgage will bankrupt you, you can't afford the house. no really. you can't.
8. As for understanding your investments and diversifying (from #1). How did these extremely wealthy people get totally wiped out of their entire life savings by Bernie Madoff??? It sucks, I do feel for them. But I also don't understand why they trusted him with everything. Someone with $10M to invest should know the basics of diversification. I mean, at least keep 20% around in cash. Just in case. It's not like losing the returns on that is going to drive you into poverty. And if you must bet big on one thing...really take the time to look in the investment portfolio and know exactly what is there. If you give someone $10M to invest, you should expect to have all of your questions answered to your satisfaction. 10 times a day if necessary. So, for people that had a net worth of $50M and lost only a few million with him, well...that sux, but it's okay because they spread their eggs around. But for the people that lost everything, it was just greed. theirs and his.
9. on that note. understand that human nature can be greedy and lazy. not to be too cynical, because it's a lot of good things too...but please, stop trusting people in regards to money. ask for details. review said details. if the numbers don't make sense, the problem is not you. it's the numbers. if you can't understand the numbers, the investment is very risky for you, because you don't know what it is. so don't put a lot into it and hope it works out. It really is that simple. If you're only investing a little, well, you can do less due diligence..but if something is "my whole retirement" you can't afford NOT to do due diligence. because it's all you have. so understand that if you are too lazy to check on your assets, someone else will be greedy enough to try to swindle you out of them. word.
10. and finally..speaking of lazy succubuses...be careful who you marry! your partner should either really be a partner to you and therefore entitled to the benefits of said partnership, or should be given only what is fair and nothing more. love and money are two different things. generosity is not a bad thing at all. but there is a big difference between being generous, and being taken to the cleaners for love. generosity with someone you love is awesome. foolishness is not.
that is all. i feel better now that i've gotten that off of my chest. suze orman comes close to giving advice like this. that's why i like her. Not because she'll give you strategies for getting rich, because she doesn't really, but because she gives you strategies for protecting what you have earned for yourself and not getting wiped out while still being a "good" person and caring about people.
posted by techdiva at
1:00 PM
2 Comments:
I just finished reading the whole "...Top 10 Things....about Money" And I must say.. Bravo, you really do give good advice. Thank you. You should blog more often about things like this because you seem to be an expert on it. Hope you follow the same advice and rules in your own personal life. Once again...Merci
@kwasi. sorry for the late reply...
i do follow these rules. it's why despite having dual income, my fiance and i still live in a 2 br condo. however, the value dropped, so i wish i never bought it! but, thankfully, we've got cash and other investments, so we're still comfortable. and i hope no one takes this the wrong, way...i'm not bragging. just saying that i really appreciate not being stressed out over being over extended financially.
Post a Comment
Links to this post:
Create a Link
<< Home